Yesterday, FHA released amendments to the Home Equity Conversion Mortgage program via Mortgagee Letter 2014-07. FHA will be holding a conference call regarding the changes on May 1, 2014. The details of the call are located below.
The primary purpose of this amendment is to clarify the requirements of the due and payable status when there is a Non-Borrowing Spouse following the death of the last mortgagor.
A Non-Borrowing Spouse is allowed in the HECM guidelines but the Spouse must be disclosed at origination of the loan. Following the death of the last mortgagor, the due and payable terms are deferred so long as the Spouse meets the criteria for deferment. The terms of the loan, however, are not assumable and any disbursements made to the Borrower(s) will cease upon the death of the last mortgagor.
To qualify for the deferment, the Spouse must:
· Have been the spouse at the signing/closing of the loan and remained the spouse during the life of the loan to date;
· Have been properly disclosed as a Non-Borrowing Spouse in the loan documents; and
· Have occupied and continue to occupy as a Principle Residence the property securing the HECM.
In addition, the Non-Borrowing Spouse must satisfy and continue to satisfy the following:
· Within 90 days of the death of the last mortgagor, the Spouse must establish a legal right to remain in the property;
· All obligations contained in the HECM loan documents continue to be satisfied; and
· Ensure that the HECM does not become due and payable for any other reason.
It also specifies that so long as the Non-Borrowing Spouse meets these requirements, the lender may not call the loan due and payable.
The conference call regarding this topic will be:
Date: May 1, 2014
Time: 3-4pm EST
Access Code: 325170
You can submit questions to be addressed during the call by emailing them to FHASFCall@hud.gov before April 29, 2014.